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The Tax Advantage
A home business qualifies for all of the same tax deductions regular businesses do. In the eyes of the IRS, the only difference between most home businesses and Fortune 500 Companies is their size, and the fact that home businesses can also deduct many household and living expenses.
Owning a home business will entitle you to deduct thousands of dollars in every day expenses. After all, why pay more in taxes than you have to?
Requirement #1: Regular and exclusive use. You must regularly use part of your home exclusively for a trade or business.
Requirement #2: Principal place of business. You must also be able to show that you use your home as your principal place of business. Alternatively, you must be able to show at least one of the following:
* You meet patients, clients, or customers at home or
* You use a separate structure on your property exclusively for business purposes.
(I have one bedroom set up as an office)
Listed below are just some of the items you are allowed to deduct:
- Your car and car expenses.
- Your mileage.
- Your home computer, printer and other office equipment.
- Your home. If you're not a homeowner, you are allowed to deduct the area where your home office is set-up.
- If you're a homeowner, you may deduct a portion of your property taxes and utilities.
- Your travel expenses.
- Your restaurant meals, entertainent, dinner parties.
- You may pay wages, tax free, to two of your children, if they are involved with the business.
- You may deduct your families health insurance.
NOTE: To qualify for the above tax deductions, you must be actively working your home business. Since tax laws are continually changing, Read on...
Ordinary business expenses are deductible even if you don't qualify for the home office deduction. If you don't meet the rules above, you can still deduct ordinary and necessary business expenses that you incur at home -- for instance, long-distance phone calls, a separate business telephone line, and the cost of office supplies and equipment. The above IRS rules apply only to the expenses of actually running and maintaining your home, such as utilities, rent, depreciation, home insurance, mortgage interest, real estate taxes, and repairs. More on Home Business Tax Deductions
